Last week, HP killed its webOS devices unit. Over the weekend, the company slashed the prices on the TouchPad. The result? The TouchPad sold out completely in a matter of hours. This confirms what I've been hearing from friends and family: "I'd love a tablet, but I'm not paying laptop money for one."

BTW designer clothes and accessories typically sell for ~100x the manufacturing cost. Designer brand polo shirts cost $~0.8 to make in China. Top designer brand jeans $~2. Most of the retail cost is due to sponsorship and marketing.

The single largest cost for Nike at one stage was sponsorship of Michael Jordan. He was paid more than the entire combined wages bill of all the employees in the manufacturing division.

Ok, first of all, you said 10-20x previously and now, in your example, it's 4x which is more realistic cost of manufacturing.

However, that's totally irrelevant, because someone has to actually design the thing, test it, have it built, manage QA, package it, ship it, market it, ,sell it, support it (and I've not even mentioned the software involved).

Just saying 'x costs 1/4 to build and so it should be cheaper' is meaningless because 'building' something ignores all the costs of getting the thing to a consumer.

You do understand that the reason why HP is getting out of the TouchPad and the desktop PC business (which they currently dominate) is because the margins are like minuscule (5% at best).

That makes for a quick explanation but there are many other factors to consider:

1) Companies (and HP is certainly not the only one in this respect) expect a much quicker turn around for their investment than it used to be. For instance when Xerox funded the Palo Alto Research Center in the early 70s they were expecting a profit in 10 (ten) years! (see "Dealers of Lightning: Xerox Parc and the Dawn of the Computer Age" for some perspective).